Sales tax deductions could add up to big savings for taxpayers

That's because Texas is among eight states that have no income tax, but whose citizens can now deduct their sales tax as a result of the 633-page American Jobs Creation Bill of 2004.

"The big news is the sales tax deduction, and we can thank Sen. Kay Bailey Hutchison (R-Texas) for that one," said Reid Warner, a principal in the Lubbock public accounting firm of Mason & Warner.

For 20 years Texans have been unable to make such a claim, but that's all changed, Warner said.

Tax assistance

 Texas Tech School of Law is offering a low-income tax clinic that provides assistance to eligible taxpayers. Law students, under the supervision of a law professor, handle a wide range of issues, including IRS appeals, examination and collection notices; earned income credit controversies; dependency and non-filer issues as well as innocent spouse issues.

 Family Size Income Ceiling

1 person - $23,275.

2 people - $31,255.

3 people - $39,175.

4 people - $47,125.

5 people - $55,075.

 For an appointment, call Tech School of Law Low Income Tax Clinic at 742-4312 or (800) 420-8037.

Lubbock CPAs said many Texans who have never thought about itemizing their returns in the past should think about it now or next year.

CPAs say there are two ways of going about it:

 Save receipts and produce them at tax time.

 Make use of federal government income-based tax tables.

"Other than the sales tax, it's hard for me to identify any other major (tax) changes this year," said Phil Houchin, a CPA in the Lubbock public accounting firm of Howard, Cunningham & Houchin.

Houchin said the tables that figure how much consumers deduct were defined by the federal government.

Houchin and CPAs said taxpayers who can make the most of it are those who in 2004 purchased big-ticket items such as cars, trucks boats - even homes or taxes involved in home remodeling jobs.

"However, I had a couple that purchased some expensive jewelry. That cannot be deducted," he said.

The IRS says if consumers have any questions related to what they can deduct, they should refer to Publication 600 - Optional State Sales Tax Table - or www.IRS.gov.

"Ninety-nine percent of the taxpayers I know, and I'm one of them, made use of the (sales tax) tables," Houchin said.

Anna Borg, a CPA and sole-practitioner, said the sales tax deduction will help those who itemize.

A-J ILLUSTRATION * JOE LANDIN

"I have a couple who saved all of their receipts. The biggest trick to it is being able to read all those wonderful cash receipts when the ink starts to fade after six months," she joked.

Phil Beasley, a spokesperson for the IRS in Dallas, said people will be surprised just how much they can deduct by itemizing their sales tax receipts.

"I think it's going to help a lot of people here who live in Texas. Some people say (the deduction through use of the table) is generous, but I've heard others say it's not enough," he said.

Another major deduction this year involved check-written donations made out in January to the Dec. 26 victims of Asian/African tsunami catastrophe that killed nearly 200,000 people.

"If the check was made out in January, then yes, you can deduct it," Borg said. "But again, you have to be itemizing."

Houchin agreed: "If you made a contribution to a charitable organization whose funds were designated for the tsunami, you can write it off this year versus next," he said.

The IRS says eight out of every 10 Texans will receive a record tax refund this year, averaging $2,400.

CPAs say other changes to this year's tax law were mostly adjustments or added benefits. Among them:

 Mileage deductions have increased from 36 cents to 371/2 cents per mile.

 Teachers and other educators can still deduct up $250 for books and other classroom supplies. That deduction has been re-enacted at least for this year.

 Taxpayers who purchased a clean-fuel or hybrid vehicle can deduct $2,000. However, the purchaser must be the original owner.

 The standard deduction this year increased $100 to $4,850 for those who file single or married, filing separately; $200 to $9,700 for those filing joint returns and surviving spouses; up $150 to $7,150 for heads of household.

 The 401-K deferral limit rose $1,000 to $13,000.

For other information and answers to questions, visit www.IRS.gov or the Texas Society of CPAs Web site at www.ValueYourMoney.org.

Double check

Before you send off that return, make sure you've:

 Double checked all figures.

 Attached the peel-off address label. If incorrect, make the necessary corrections on the label.

 Make certain you've entered the correct Social Security number, including those of any dependents.

 Sign and date your return; if joint-filing, both spouses must sign and date.

 Attach all Forms W-2 and 1099-R and others that reflect tax withheld to the front of the return.

 Attach Form 9465 to the front of the return if seeking an installment agreement request.